Does Wells Fargo Have a Bright Future?

With shares of Wells Fargo (NYSE:WFC) trading around $41, is WFC an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework.

T = Trends for a Stock’s Movement

Wells Fargo is a diversified financial services company. It has three operating segments: Community Banking; Wholesale Banking; and Wealth, Brokerage, and Retirement. The company provides retail, commercial, and corporate banking services through banking stores and offices, the Internet, and other distribution channels to individuals, businesses, and institutions around the world. Wells Fargo also provides wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, insurance agency and brokerage services, computer and data processing services, trust services, investment advisory services, mortgage-backed securities servicing, and venture capital investment.

Wells Fargo, the largest home lender in the U.S., recently reached a $869 million settlement with Freddie Mac over repurchase liabilities on loans Wells Fargo sold to Freddie Mac before 2009. According to a statement from Wells Fargo seen by Bloomberg, the settlement includes a cash payment of $780 million, and Wells Fargo had already set aside money to cover the cost. Government-owned firms Freddie Mac and Fannie Mae were forced to take a $187.5 billion bailout due to losses on bad mortgages during the financial crisis.

T = Technicals on the Stock Chart Are Mixed

Wells Fargo stock has been surging higher in the past several years. The stock is currently pulling back from all-time high prices, so it may need time to settle. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Wells Fargo is trading between its key averages, whichs signal neutral price action in the near term.


Source: Thinkorswim